Complexity and competition in the public accounting profession will rise as businesses demand more, better, faster, and cheaper.
Working in teams and harnessing data will become more critical. Services in areas of assurance, audit, tax, and advisory work will remain the core, while emerging international markets will open up risk and opportunities and, operationally, demand a balance between leveraging local talent and providing globally consistent services.
These were some of themes on the minds of leaders from eight major accounting firms who gathered Wednesday for a panel discussion at the AICPA’s spring Council meeting in Washington.
Firm executives are bullish about the future of the profession and public company auditing. They are seeing signs of optimism and a willingness to invest and grow among their clients. And, while upbeat, the panelists were outspoken about the level of scrutiny public company auditors are under and its potential impact on the future of the profession.
Ten years after the Sarbanes Oxley Act of 2002 imposed new regulations on public company auditors, additional measures, such as mandatory audit firm rotation, are being debated in the U.S. and Europe.
“We’re going through a period of change,” said Bill Freda, vice chairman and senior partner at Deloitte LLP, pointing to what he described as an unprecedented level of stress in the public company audit space.
But Freda and the other panelists are confident the pendulum will swing back. Meanwhile, the firms are working to keep the discussion focused on changes that would make an impact on audit quality and protect investors and capital markets.
“If it enhances audit quality, we ought to be for it,” said John Veihmeyer, chairman and CEO of KPMG LLP. He said he worries some of the measures under discussion by the PCAOB and European Commission would not improve audit quality and would have unintended consequences, including a level of regulation and second-guessing that would create barriers to attracting and retaining top talent to accounting.
Variable optimism, global forces
The firm leaders, who have insight into the C-suite and board room through the public and private companies they serve, said they sense resilience and optimism. But Veihmeyer said the euro-zone crisis, uncertainty in Washington in the run-up to the presidential election, and the potential for a major eruption in the Middle East that would disrupt trade are weighing on the minds of business leaders.
The financial sector is stronger, private equity and deal-making are heating up, and companies appear to be ready to pull the trigger on technology investments, said Chuck Allen, CEO of Crowe Horwath LLP.
But much of the global business outlook “depends on where you sit,” said Steve Howe, managing partner, Ernst & Young. Howe is seeing optimism in the U.S. His firm’s fastest growing market is Brazil and he sees great potential in the BRIC countries. But he called Europe a day-to-day concern. “It’s quite variable,” Howe said.
As public accounting firms expand internationally, providing consistent quality across different and often sprawling markets will be a challenge, panelists said. One way Deloitte is meeting the challenge is through Deloitte University, a staff education initiative designed to cement a single global culture, Freda said.
Grant Thornton is focusing on continuous improvement to its methodologies in audit and tax, said Lou Grabowsky, the firm’s chief operating officer. Meanwhile the firm is tracking indicators of quality and developing processes to benchmark its professionals and discover roots of problems through data mining.
KPMG’s Veihmeyer said one of the biggest challenges facing leaders in public accounting is making sure their teams have enough time to serve complex clients.
Jean Hobby, a national assurance sector leader at PwC U.S., said globalization will put an increased importance on one aspect of the human capital equation: diversity.
“It’s now a necessity,” Hobby said. “Ten years from now it will be an absolute requirement.” Some gains in diversity in the profession will happen organically, she said, while others will need leadership to encourage.
—Kim Nilsen (firstname.lastname@example.org) is executive editor of the JofA.